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Govt opens up on Mothae mine developments

Business

Bereng Mpaki

The Department of Mines and Geology in the Ministry of Natural Resources has confirmed it is in talks with Lucapa Diamond Company over the sale of its 70 percent stake in the Mothae diamond mine.

The Australia Stock Exchange (ASX) listed Lucapa announced earlier this week that it was considering relinquishing its share in the mine, following a review of its asset portfolio by its new board of directors.

Lucapa holds a 10-year mining lease for Mothae mine it acquired for an estimated $9 million (about M140 million) in 2017 before commencing commercial operations in 2019.

While Lucapa said the move was meant to streamline its core assets, the company’s 2023 financial statements showed that the quality of Mothae’s diamonds dipped significantly in the fourth quarter of the year.

The report revealed that there were very few high-quality large diamonds recovered in the last quarter of the year, and that challenged the year’s overall performance.

In a bid to balance the financial implications of the production slowdown, this publication has it on good authority that the mine implemented cost-restructuring measures, among others abandoning night shift operations in some departments and laying off the redundant staff.

Despite running a US$1.1 million loss during 2022, the financial statement showed that Mothae’s operations improved significantly with its earnings rising to US$2.9 million in 2023, due to an improved operational performance during the first quarter, the report showed.

The Department of Mining’s information office told Newsday yesterday that Lucapa had informed them about the proposed sale of its shares at Mothae mine.

The government holds 30 percent free carry shares in the mine.

The department could not, however, be drawn into discussing the possibility of it taking over Lucapa’s 70 percent shares of the mine on behalf of the government; a development which could herald a welcome change in the much-maligned system of ceding majority shareholding in diamond mining operations to foreign investors.   

The office, however, indicated that Lucapa has since cleared its M175 million debt to the government for acquiring the mine, as had been flagged by the Auditor General in the 2020/21 audit report of the consolidated financial statements of the government of Lesotho.

“Mothae was sold for $9 million in 2017, an equivalent of M140 million at the time, and has since been paid off. The last instalment of the payment was made in 2021,” the statement concluded.

Attempts to contact the Minister of Natural Resources, Mohlomi Moleko, for comment were unsuccessful.

Lucapa’s Managing Director, Nick Selby made the following announcement on Wednesday this week.

“Lucapa Diamond Company Limited (ASX:LOM) (“Lucapa” or the “Company”) wishes to provide a corporate update following a review of the asset portfolio by the Company’s newly restructured board of directors. The Board is considering all options for the divestment of its 70 percent stake in Mothae and the Company is discussing the options with the Government of the Kingdom of Lesotho, the 30 percent partner in the mine.”

Lucapa’s chairman, Stuart Brown, said the company is trying to streamline its portfolio to focus on its core assets.

“On review, it is clear the Company should streamline the portfolio to focus on our core assets in Africa and Australia. The Company’s collaboration with the Lesotho Government on the Mothae Diamond Mine has been rewarding, and our management have worked exceptionally well to optimise the plant to recover large diamonds. We expect there will be significant interest from those within the diamond industry and on a wider scale,” Brown said.

Located in the diamond-rich maluti mountains of Lesotho about five kilometres away from the so-called world’s highest dollar-per-carat kimberlite, Letšeng Diamond Mine, Mothae is an open-cast mine, which is known to produce large, high-value diamonds, which command impressive prices in the market.

Before Lucapa’s takeover, Mothae mine was operated by Lucara Diamond Corp, which had incidentally dropped it in 2015 after completing the prospective mining stage.

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